MTR fare formula must be reviewed

Public transport in Hong Kong is known for its efficiency and low fares. But that does not stop people complaining whenever an increase is in the pipeline. That is why a more transparent adjustment mechanism was introduced in 2007. Passengers were promised that a formula taking into account changes in inflation and transport workers' wages would enable increases as well as cuts. It was hailed as a more objective benchmark and a breakthrough from the previous mechanism, which made fare cuts a rarity, if not impossible.

But so far passengers have not benefited from any fare cut under the formula. Instead, soaring inflation has enabled MTR to raise fares twice - by 2.05 per cent in 2010 and 2.2 per cent last year. The third increase is under way. The latest wage and inflation figures suggest the rail operator can, despite making a hefty profit of HK$14.7 billion last year, charge 5.4 per cent more from June, the steepest increase yet under the revised mechanism. Not surprisingly, calls for a review of the mechanism are growing.

Part of the deal to merge the rail operations of the MTR and the Kowloon-Canton Railway Corporation in 2007, the formula was introduced for good reasons. It seeks to base annual adjustments on objective and transparent figures rather than political wrangling. As prices can go up as well as down, it makes sense to adopt an index that allows upward and downward adjustments. Unfortunately, the consumer price index has since continued to spiral. Until deflation hits again, passengers will have no choice but to pay more every year.

There are inadequacies with the formula. Changes in bus fare are also subject to a similar formula, but still require approval from the Executive Council, whereas such gatekeeping is not extended to MTR fares. The formula enables the profit-making rail operator to charge more as long as the formula suggests so. Inevitably, there is a growing perception that it has become a tool to legitimise fare rises. Besides, the index does not take into account wage changes beyond the transport sector. Whether employees in other industries can afford the fare increase is not taken into account. The amount of profit made by MTR, as well as its performance, are also not factors for consideration.

Our clean and efficient railway system may be the envy of the world, but that does not give it the right to charge more every year automatically. As inflation is expected to bite deeper, the need to review the formula has become more urgent. It is good to see that the government is to commission a consultancy study on how to improve the mechanism. Every effort has to be made to ensure fare adjustments will be fair and affordable. In the meantime, the MTR should offer more fare concessions to ease the burden on passengers, in particular students, the elderly and the disabled.